There Is A Reason Why Gas Stations Need Your Zip Code

Recently I wrote an article about why so many stores ask for your ZIP code at check-out. With your name and ZIP they can turn to outside data brokers to learn your address, phone number and email — even though you did not authorize them to collect this information. Many readers wrote in to say they routinely give false ZIP codes when paying for items to subvert this process. Others asked what happens when you pay for gas at the pump with a credit card and the machine requests a ZIP code.

“Is this required? If not, how do you get around this other than paying cash?” one wondered.

Another reader, Michelle Achee, the wine department buyer at LifeSource Natural Foods in Salem, Ore., said she faced unpleasant lecturing because she did not want to give her ZIP code. “A local gas station here in Salem will not dispense gas to you if you don’t give them the ZIP code,” she said. “They insist that it’s ‘for security reasons’ to make sure you’re not using someone else’s credit card to buy gas. If you try to give them an alternate number, they treat you like a criminal.”

Nationwide, nearly 125,000 convenience stores are responsible for an estimated 80% of all gas sold in the United States, according to National Association of Convenience Stores, and, yes, they say, automated pumps do need your real ZIP code.

“Asking for the ZIP code at the pump is security related. Someone with a stolen card would be less likely to correctly enter the ZIP,” said Jeff Lenard, the group’s vice president for industry advocacy. “Thieves often test cards to see if they are still ‘live’ at places where they don’t have to engage in a face-to-face transaction, such as at the gas pump. This is done so that there is not a confrontation where they could have the card confiscated.”

“After a successful test, the thieves may then try it at retail locations. So, by requiring a ZIP, it may limit options for the thief. Unfortunately, it adds a level of inconvenience for the law-abiding customer.” He said the information is not stored for marketing but sent to the credit card processor and then to the card brand such as Visa V -0.98% as MasterCard MA -0.39%.

Credit card companies and others involved in the process say the ZIP code is not kept or used for marketing purposes in these self-service gas station operations. “Generally our contracts restrict merchants from using or storing American Express AXP +0.03% card member information provided during a transaction other than to facilitate the transaction,” said Sanette Chao, a spokeswoman for American Express. “It is the merchants’ discretion whether to process an American Express transaction if the card member refuses to provide his or her ZIP code.” Energy companies including ExxonMobil and Phillips 66 PSX +2.38% confirmed that they request ZIPs at the pump only to reduce fraud and said the number is not kept after the transaction. BP BP +0.39% said it strongly encourages its gas stations to use ZIP code verification.

California has led the nation by barring stores from collecting personally identifying information during credit card transactions. But even there, legislation, backed heavily by the Western States Petroleum Association, allows a ZIP code exception for gas stations. A 2011 analysis for the California Judiciary Committee explained that credit card companies provided financial incentives to use ZIP code verification at the pump.

“The sponsor indicates that in some cases there may be a contractual requirement that the gas station collect a customer’s ZIP code,” it said. “But it is more likely, according to the sponsor, that there is no contractual requirement and instead the issuing bank grants the gas station preferential pricing if it collects a customer’s ZIP code to verify the transaction.”

Jennifer Doidge, a Visa spokeswoman, said that the company processing the transaction (often a middleman between the gas station and the credit card’s issuing bank) may offer a discount. “The processor may view these transactions as less risky and may opt to price them differently,” she said.

What had irritated motorist Michelle Achee was that she lives in Oregon, one of two U.S. states that mandate full-service gas stations (the other is New Jersey), so they already have an added layer of security in a person overseeing the sale. When one station’s attendant told her he needed the ZIP code to process the transaction for her safety, she replied: “How is giving my ZIP code to a complete stranger at the gas pump good for my security?” She said other Oregon gas stations do not ask for the ZIP code, so she goes to them instead.

What if someone really does not want to enter her ZIP code when buying gas at an automatic pump? Then she can use the credit card inside where a person handles the transaction. Shelly Faris, a spokeswoman for CST Brands, which spun off from Valero in May and has almost 1,900 locations in the U.S. Southwest and Eastern Canada, explained why. “It is not needed inside the store because the card can be reviewed by the cashier to ensure it looks like a true credit card,” she said. ‘And, our customers sign for the credit card transaction if it is over a specified amount as defined by the card company.”

There are still others options: debit cards, or you can always pay for gas with cash, without a ZIP code.

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